Certified Gold Investors Watch EU, Federal Reserve

Posted by James Randolph onFebruary 10, 2010

February 10, 2010 – Following gains on both Monday and Tuesday, gold has turned lower this morning as investors continue to watch for direction from both the European Union and the US Federal Reserve on important economic policy decisions. Prices dropped to $1,072.00, down $6.60 as investors wait to see if the EU has a bailout plan for Greece, and if the Federal Reserve continues calls for withdrawing stimulus funds and possibly raising interest rates.

Rumors have been circulating that the EU has been working toward a plan that will bring Greece out of its sovereign debt crisis. Analysts are speculating that the EU could offer loan guarantees or financial assistance from such countries as Germany or France, although no decisions have been reached and upcoming discussions will be critical.

Investors are also watching the US Federal Reserve as concerns over excessive currency in circulation and inflation have surfaced. Recently testifying before the House of Representatives Financial Services Committee, Ben Bernanke recognized this potential problem when he said, “We are quite confident that we can raise interest rates, reduce the money supply and do that all in a timely way to avoid any inflationary consequences.”

These two issues could have effects on certified gold and the US dollar as they could impact both the strength of the euro and the economic stability in the US. The dollar has made recent gains that many believe are partially the result of a weakening euro, while a return to inflation in the US could have differing effects on the dollar and gold. “Precious metals are perhaps the great beneficiaries of the dollar’s weakness,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager said recently. “Gold is, of course, benefiting from the confusion reigning in Europe.”

With current events playing an important part in deciding the strength of the dollar, certified gold investors are watching the stories unfolding in Greece and at the Federal Reserve. As gold positions gain strength, investors should look to add it to their portfolios to reap the benefits of possible gains.